Thursday, June 07, 2007

The Administration has released its updated economic forecast. The top line number--the annual rate of growth in real GDP--has been revised downward from 2.9 percent to 2.3 percent for the four quarters of 2007 (the prior forecast is here). The forecast is dated June 4, 2007, so it incorporates the latest news on GDP growth for the first quarter. This suggests that forecast is based on the view that we will return to 2.9 percent growth in the second through fourth quarters (since (1.006*1.029*1.029*1.029)^(1/4) is roughly 1.023). Here's the relevant excerpt:

The forecast revises the projection of real gross domestic product (GDP) down from 2.9 percent growth to 2.3 percent during the four quarters of 2007. This revision incorporates the slower growth that occurred in the first quarter of the year with the expectation that solid growth will resume for the rest of 2007. The economy has now experienced over five years of uninterrupted growth, averaging 2.9 percent per year since the expansion began in 2001. Real GDP is projected to grow at about the historic average in 2008 and for the remaining years of the forecast.

I doubt many people will see this forecast as "too pessimistic," but I'm almost three years removed from spending a lot of time following the macroeconomy. The next stop for this forecast is to be used as an input into the Mid-Session Review of the budget by Treasury and OMB. The projected budget deficit will widen, but we have to wait until July (usually) to find out how much.

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•Import Rebound from the Chinese New Year Lull Fails to Impress•Oil-Related Imports Flat Versus March, But Seen Shooting Up Again in May•Auto Imports Softened in April, Nosedived in May

NEW YORK (EconoPlay/TTN) June 6 – Export growth remained on a consistent upward trajectory in April, influenced by a weakening dollar – spelling relief for the monthly trade gap in defiance of continuing, heavy petroleum-related imports, cargo officials say.

Imports are presenting a fuzzy and fractured portrait these days. Consumer goods from Asia rebounded from the Chinese New Year hiatus but failed to match year-ago levels. Auto imports slowed in April then took a stunning dive in May.

Petroleum-related imports in April were about even with heavy March inflows. But the trade gap could widen again in May as gasoline imports spiked ahead of the summer drive season at record prices.

The U.S. Commerce Department is scheduled to release international trade data for April on Friday at 8:30 a.m. ET. The above commentary also explored May on a preliminary basis

About Me

I am a Professor of Economics and the Director of the Nelson A. Rockefeller Center at Dartmouth College. I am on the board of Ledyard Financial Group (LFGP) and currently serve on the Census Scientific Advisory Committee. I blog about economics, politics, and current events at http://samwick.blogspot.com. The opinions expressed here, there, and everywhere do not necessarily reflect the views of Dartmouth College or any other institution with which I am affiliated.

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